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Windstream Energy has filed a $475 million claim under NAFTA because of Ontario’s offshore wind farm moratorium

By John SpearsBusiness Reporter

Fri., Nov. 23, 2012

A wind energy company says it wants $475 million in damages because Ontario’s moratorium on offshore wind farms has thwarted its project.

Windstream Energy LLC quietly filed a notice last month of its intent to file a claim under the North American Free Trade Agreement (NAFTA) for lost profit.

Windstream wants to develop a 300-megawatt wind project in eastern Lake Ontario, off Wolfe Island. The company says it’s owned by a New York-based investment group. Its Ontario unit, Windstream Energy Inc., is based in Burlington.

The Liberal government slapped a moratorium on all offshore projects in February, 2011, saying further study was needed on their impact on health and the environment. It has given no indication when those studies might be completed.

While dozens of projects were affected, Windstream says its Wolfe Island development is exceptional: Unlike most other projects, it holds a renewable power contract, called a feed-in tariff contract or FIT, from the Ontario Power Authority.

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In a letter to an industry group supporting offshore wind, Windstream president Ian Baines says the company has been backed into a corner.

“Although we view litigation as an absolute last resort, we have been given no other option but to pursue this path,” he said recently in a letter to the Lake Ontario Offshore Network.

“We hope that this mechanism will break the provincial political interference.”

The company says it has deposited a $6 million letter of credit with the power authority.

It has also entered into a binding turbine supply agreement with Siemens Canada, worth more than $600, the company says.

The government’s actions have frustrated its ability to develop the project, according to the notice.

Windstream claims that the moratorium violates NAFTA. (Formally the complaint is filed against the federal government, which is held responsible under the treaty for the actions of provinces.)

The treaty prevents expropriating the investments of U.S. investors in Canada, unless it’s done for a public purpose, with due process and the investor is paid fair market value in compensation, Windstream says.

The moratorium, it argues, has effectively deprived Windstream of the value of its project, and that amounts to expropriation.

Windstream also complains that other investors have received better treatment from the province.

For example, it says the Korean firm Samsung has been given “special, more favorable treatment.” Samsung and its partners were granted the right to develop 2,500 megawatts of renewable power, on condition they invest $7 billion, source many of their supplies in Ontario, and meet job creation targets.

“The government of Ontario has also recently arranged to relocate two gas generation facilities and to pay compensation to the Canadian investors that own them after the two projects were cancelled by the government of Ontario as a result of community opposition,” the notice adds.

The province has made no effort to relocate the Wolfe Island project, the notice says.

Windshare says it has proposed relocating the project on-shore, or converting it to solar power, but both ideas have been rejected.

As a result, the company says it is seeking damages of “at least $475,230,000” for “lost profits and other damages” resulting from the moratorium.

A spokesman for energy minister Chris Bentley said the province can’t comment on the filing because it could result in litigation.

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